British Gas has been ordered to pay £5.6million in compensation and fines after it admitted to blocking its business customers from switching supplier and failing to tell others their contracts were ending.

The energy giant has already paid £1.3million to affected customers, and will now have to cough up another £3.45million to put into an energy efficiency fund, plus an £800,000 penalty.

The payments come after Ofgem carried out two investigations into British Gas Business.

Fined: British Gas was asked to pay up after Ofgem concluded two investigations into its business arm

The first found that between 2007 and 2012, around 5.6 per cent of the objections it made to business customers wanting to switch suppliers were invalid.

This was caused by errors in the energy company’s computer systems and inadequate controls to detect when objections to switches were invalid.

The second revealed that British Gas failed to tell around 1,200 mainly small business customers that their tariff was about to expire.

This meant customers were denied the prompt to shop around for a better deal and instead either continued on the same terms or were rolled over on to standard tariff rates, which were more expensive than their previous contract.

British Gas has already paid back nearly £1.3million to fully compensate all current customers affected by this failing, and is in the process of contacting and paying back around £150,000 to former customers who have since switch suppliers.

If they are unable to track these down, the remaining money will go into the Energy Efficiency Fund.

Ofgem said British Gas had moved quickly to rectify the mistakes, something reflected in the amount it has been ordered to pay.

Sarah Harrison, Ofgem's senior partner in charge of enforcement, said: ‘The ability for consumers to switch easily and fairly is key to a well-functioning energy market.

‘In these cases British Gas Business failed these consumers who were wrongly blocked from switching, many of them small businesses, and denied others the chance to switch to a better deal at the end of their contract.

Energy companies in general are suffering from a lack of trust among their customers, a recent survey found (Source: Ofgem)

‘British Gas Business fully accepts its failings, has stopped the practices and corrected its processes to prevent this happening again.

‘The company has taken responsibility for its actions and this package strikes a balance of penalty for the company and redress for affected consumers.’

Some businesses are legitimately barred from switching suppliers, for example if they still owe money on an account.

But one of Ofgem's investigations found that in some cases computer problems were compounded by inadequate controls and poor communication with customers regarding why they were being blocked and how it could be resolved.

Mistakes: Around 5.6 per cent of the objections British Gas made to business customers wanting to switch suppliers were invalid

British Gas apologised and said it accepted the findings of both investigations.

It said it has already compensated current customers who were affected and it is tracing former customers to repay them as well.

Stephen Beynon, managing director of British Gas Business, said: ‘We're sorry these errors occurred and have worked swiftly to change our computer systems and processes, putting controls in place to stop this happening again.

‘We take any failure to meet our obligations very seriously and will ensure that the new energy efficiency fund we have set up will be a real help to hundreds of small businesses.

‘It will provide free expert advice and energy efficiency measures, such as new boilers, lighting and renewable energy, to help firms to manage their energy consumption and bills over the long term.’